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Winter 2000-2001
Volume No. 1
The annual meeting of ASCS and the SEC is valued by all attendees for its
relevance and depth. It remains, perhaps, the best chance for Society members
to meet face-to-face with members of the Commission and ask them questions about
the application and mechanics of any new rules or interpretations. This year,
the agenda of the meeting included discussion about auditor independence, Regulation
FD, Rule 10b5-1 and Form 144 (the connection or overlap between them), EDGAR,
No-Action letters, and householding.
To begin the meeting, Peggy Foran, Chairman of the Securities Law Committee,
thanked the SEC - "We appreciate the dialog we've had for many
many years," she said, also adding that even without Section 16 there is
always plenty to talk about at these meetings.
Auditor Independence
One of the first points on the agenda addressed the "geography of disclosure"
for the new auditor independence rule (Rel. No. 33-7919). The rule states, "Our
disclosure requirement has three components: (1) disclosure regarding fees billed
for services rendered by the principal accountant; (2) disclosure regarding
whether the audit committee considered the compatibility of the non-audit services
the company received from its auditor and the independence of the auditor; and
(3) disclosure regarding the employment of leased personnel in connection with
the audit." Society member Bob Lamm asked about the appearance and placement
of these disclosures, and in response David Becker, General Counsel, said that
the caption itself was most important, not the placement, although it seemed
agreed by those present that the logical place for the entire section to go
is the Audit Committee Report. In elaborating on the question, David Martin,
Director, Division of Corporation Finance, used an example of negative assertion
to illustrate how a section marked "Auditor Fees" could be broken
out. Should no IT fees have been paid to the auditor's company, it would
be easy to say in a sentence, or in tabular form, that no IT fees were paid
to the firm that year. Although specifying a zero sum total for any of the three
requirements is not mandated by the rule, including any such negative assertions,
Mr. Martin suggested, would lend consistency and clarity to the report. Mr.
Martin also said that the practice of disclosure will soon become routine and
not at all laborious.
Regulation FD
Regulation FD was next on the agenda of the meeting, and again "nuts-and-bolts"
applications of the rule were the main concern of Society members present. Cary
Klafter said that ASCS members were supportive of Reg FD as "a statement
of primary philosophy," but mentioned that they had many concerns about
"what constitutes what" in the eyes of the Commission. For example,
on the attendance of press - is compliance assured through the presence
of a certain type of press, or in the number of journalists to meet a certain
ratio? The answer the Commission gave is that the presence of the press at a
meeting does not automatically make it public, and that even if it is assuredly
public, it must still be ensured that the information presented is disseminated
broadly. The ways in which various companies are achieving this challenge were
discussed here, from press releases, to 8-Ks, to updated and forward-looking
Web sites. The Commission has found that the process of adjusting to the new
procedure has not been altogether smooth - for example, some staff members
present emphasized that the Commission cannot back-date 8-Ks - but they
also have received a great deal of positive feedback on the rule. Corporate
lawyers, especially, have expressed appreciation for having "something
to point to" that mandates the kind of behavior they have been recommending
to clients for years.
SEC officers and staff present indicated that they knew they were speaking
to a group of dedicated, conscientious professionals when speaking to members
of ASCS. David Martin added that in interpreting "FD," the SEC does
not want to reverse all that has been done in terms of disclosure and all that
"has been going in the right direction."
Rule 10b5-1 and Form 144
It was agreed by Society members present and by members of the Commission that
Rule 10b5-1 and Form 144 are at odds as of the moment, since Form 144 requires
a disclosure at the time of sale and Rule 10b5-1 requires a pre-written plan.
Some guidance from the Commission may be forthcoming (a Q&A, perhaps), but
for the near term, the Commission recommended the following steps: modify the
form to make the representation, specify the date, and put it in writing.
EDGAR
On behalf of ASCS, Peggy Foran expressed appreciation to the Commission for
the extension of the legacy EDGAR system. Having the new system available, however,
seems to lead to another question - will Form 144 ever be filed electronically?
"The short answer is yes," members of the Commission replied, but
mentioned that having a user-friendly system is a paramount concern. One caution
for filing EDGAR documents with the new system, however, (for those companies
who can currently take advantage of it) is that graphics should not be used
in place of information that should rather be downloadable and searchable.
No-Action Letters
No-Action Letters are always a favorite topic for the annual SEC meetings.
True to form, the subject was addressed this year, too, and David Martin asserted
that the SEC remains "ready for that which we can predict." Last year
was a record year in terms of shareholder proposals, and the trend shows no
signs of diminishing. A separate article on this subject, which outlines the
Commission's recommendations for success and timeliness this year, can
be found on page five of this newsletter.
Householding
Society members present also expressed appreciation for the householding rule.
As discussed at Issues Update 2000 (for more on this, see the article which
begins on page three), the householding rule is a real opportunity for companies
to save money. For this year, however, there may be some problems in the realization.
Are all intermediaries ready to provide the necessary services and specifications?
Will labeling an envelope be impossibly complicated by the potential number
of shareholders in a family? (How many shareholder names do actually fit in
an envelope's window?) Should each shareholder still receive a separate
proxy card, and can these be mailed together? Because of issues such as these,
many member companies may not take advantage of householding this year, although
some companies may be more prepared.
Dear Fellow Member:
First and foremost let me wish each of you good health and happiness during
2001, a year which marks the 55th anniversary of the founding of the American
Society of Corporate Secretaries. Several of our Chapters will celebrate their
50th anniversaries during 2001: Detroit, Los Angeles, Pittsburgh and New York.
(Although the Society was started in New York in 1946, the first Society Chapters
were Chicago and San Francisco, founded in 1948.) Celebrating 45 years are the
Dallas and Houston Chapters, and celebrating 20 years are the Kansas City, Milwaukee
and Oklahoma Chapters. Congratulations to all our Chapters and to the many members
who have made them vibrant throughout our history.
My year as Chairman is about half-over, and I do feel a sense of accomplishment.
As you probably know, I have been very involved in the Society since I joined
in the 1980s. As I contemplated my tenure as your Chairman, I decided it was
very important for our future to examine our procedures and decision-making
processes - our own corporate governance, if you will. After all, our tag-line
is "promoting excellence in corporate governance!"
Together with Society President David Smith, I established a number of task
forces, or what I called "SWAT" teams, to take a look at important
aspects of how we do things. This was not undertaken because of any problems
or glaring concerns, but as a healthy exercise for a mature organization. More
"SWAT" teams may be organized, but to date, board members have been
organized to look at ascs.org, the role and composition of our audit and finance
committees, our chapter structure, and the process for entering into cooperative
arrangements with other groups, such as bar associations and business organizations.
Important action steps have been recommended and already implemented in many
places, with one exception - the "SWAT team" (task force) on
chapter structure concluded that our current model was integral to the Society,
and that a professional organization should be engaged to conduct a qualitative
investigation of alternatives to our chapter structure and meeting formats among
current members. I hope that if asked by either me or David Smith, you will
participate in one of the focus groups which will be organized.
Finally, as we look forward to our 55th National Conference at The Broadmoor
in Colorado Springs this June 27 - July 1, 2001, where we will select a Chairman-Elect
and eight new Board members, I urge you to suggest individuals who will serve
us well, with an increasingly diverse and growing membership and new and challenging
requirements.
I look forward to welcoming you to The Broadmoor where the business program
will be outstanding, the opportunities for networking abundant and the professional
and career enhancements guaranteed!
Sincerely yours,
Gwenn Carr
The annual "Issues Update" seminar has traditionally been a time
to focus on the proxy season. This year proved no exception, because in addition
to many other in-depth presentations, there were several experts on hand to
speak about the challenges corporate secretaries will face this season when
dealing with institutional investors and shareholders. On the first day of the
seminar, in a panel moderated by Kathy Combs titled "Corporate Governance
Challenges," Bruce Babcock, President, Institutional Shareholder Services;
Kenneth Bertsch, Director, Corporate Governance, TIAA-CREF; Nell Minow, Editor,
The Corporate Library; and Kurt Schacht, Chief Operating Officer, Evergreen
Asset Management Corporation, each spoke about some of the governance issues
that are most pressing this season.
Bruce Babcock spoke first of ISS's increasing focus on boards - their
composition, structure, and processes - and mentioned that investors are
asking for help in dealing with boards who disappoint. Some of the concerns
he has heard recently? Executive compensation and CEO succession are two of
the most notable. Mr. Babcock also mentioned that ISS was in the process of
reviewing new voting guidelines. These guidelines have since been approved,
and one major change, from their memo on the subject, is that in 2001, ISS "will
be extending 'withhold' recommendations on board insiders to situations
where a company lacks either an audit, compensation, or nominating panel altogether."
ISS also recommends withholding votes from board members at the next annual
meeting (moving closer to the Council of Institutional Investors "one strike"
policy), for those boards who fail to act on a shareholder-sponsored proposal
which is supported by a majority of shares outstanding, and has said that it
will continue to evaluate repricing with regard to the accounting changes made
by the Financial Accounting Standards Board. However, ISS does "not plan
to effect any modifications to repricing policy for the upcoming proxy season."
The three speakers who followed Mr. Babcock - Kenneth Bertsch, Nell Minow,
and Kurt Schacht - detailed the work their organizations are doing to monitor
corporate governance in corporations. Ken Bertsch of TIAA-CREF told attendees
about a surprise issue he met with this year - the accuracy of proxy voting
- noting that he had recently been part of two press calls on the subject.
He also said that executive pay is sure to be an issue, adding that "executive
pay is a nice window" on a corporation's board. He emphasized that
TIAA-CREF will continue to monitor very closely any developments in the compensation
area (see the SEC's recent Proposed Rule on the Disclosure of Equity Compensation,
Release No. 33-7944), and that the role of the compensation committee in all
these concerns remains a critical one. Mr. Bertsch also said that TIAA-CREF
was very supportive of the auditor independence rule (originally asking for
even stronger provisions), and that the organization will be monitoring proxy
statements closely in order to analyze the auditor fee disclosures included
therein.
Nell Minow agreed that executive pay is a prime issue deserving of attention,
and reviewed several extravagances in CEO employment contracts that the Corporate
Library has uncovered. Ms. Minow's company, The Corporate Library (www.thecorporatelibrary.com)
is a resource that has become more and more robust in many important areas.
For example, it currently highlights directors who have poor attendance records,
directors who do not own any stock, and directors who are over 80.
Kurt Schacht concentrated on dilution in his talk, pointing to Chairman Levitt's
speech of November 3rd. ("Costs Paid with Other People's Money,")
As noted on the Society Web site, the SEC has since published a proposed rule
relating to this concern (Rel. No 33-7944). Drawing on his experience at the
State of Wisconsin Investment Board (SWIB), Mr. Schacht talked about some of
the actions related to dilution in which SWIB has been involved, most recently
the case of State of Wisconsin Investment Board v. Peerless Systems Corporation
and Edward A. Gavaldon. On December 4, the Delaware Court of Chancery denied
summary judgment on this case, and further litigation is to follow.
Another side of the proxy season is in the "nuts-and-bolts" detail
of processes and procedure. In light of this, the second day of the "Issues
Update" seminar included a panel moderated by Carl Hagberg, Chairman, Carl
T. Hagberg & Associates, called "2001 Proxy Season Tips & Cost-Saving
Ideas." The speakers on the panel were Richard Daly, President, ADP Investor
Communication Services, Automatic Data Processing, Inc.; Joyce Haag, Secretary,
Eastman Kodak Company; and Thomas Montrone, President and Chief Executive Officer,
Registrar and Transfer Company. To begin the discussion, Mr. Hagberg ran down
a "fast list" of cost-saving ideas. First and foremost was the idea
of "throwing out the old play book," to fully take into account some
of the new opportunities for cost savings that householding, electronic delivery,
and electronic voting now make possible. Some simple ways to save in the near
term? Consider sharing meeting space and infrastructure expenses with another
company whose meeting is a day before or after your own, take a look at paring
down your multimedia, and consider meeting sites with fixed A/V facilities. In
addition, you may want to consider bidding several aspects of the whole project
out, if this has not been done in a while. For more tips of this kind, see issues
of "The Shareholder Service Optimizer," and its special supplement of
November 2000, "Communicating With Investors Cost-Effectively."
Joyce Haag spoke next about her company's experience with electronic delivery.
Three years ago, Eastman Kodak began to electronically deliver annual reports
to employees. In that first year (1998), the Company electronically delivered
its Annual Report to 9,000 employees and of those only 200 requested a hard
copy. To do this, the Company relied on the implied consent of employees provided
under the SEC regulations. In 1999, the project was extended to a subset of
registered holders, and also to the group of employees who had access to the
company e-mail system (Lotus Notes) but not the Internet. For this latter group,
the problem of access was solved by loading the annual report and proxy statement
into a Lotus Notes database, from which the information could easily be obtained.
Another project that Kodak began in 1999 was to find out which beneficial shareholders
had accepted electronic documents from other companies. To do this, the Company
asked ADP to compare a list of the Company's beneficial shareholders to
a larger list on file with ADP of those shareholders of other companies who
had consented to electronic distribution of annual meeting materials. By completing
this process, Kodak was able to more than double the number of shareholders
reached electronically, from 9,000 to 22,000. Kodak has also been able to realize
cost savings through the use of electronic voting, and has seen significant
increases in numbers of shareholders using both phone and Internet voting, with
approximately 20% of its shareholders using one of these methods.
Tom Montrone reviewed the SEC householding rules, explaining that householding
is the mailing of a single annual report and proxy, through implied consent,
to multiple registered shareholders of the same last name living at the same
address. Implied consent may also be valid if the company "reasonably believes,"
from previous communication or through other sources, the coresidents of an
address to be of the same family. For more detail on the rule, see ascs.org
or SEC Rel. No. 33-7912.
Rich Daly emphasized that his company, ADP, is moving beyond accuracy and towards
economics in their realization of cost-saving opportunities. They now have the
ability to take advantage of intelligent mailing systems, and there is a steadily
growing number of investors who are willing to receive annual meeting materials
electronically. It is a "building effect," he said, but he stressed
that now is the time to take advantage of what is possible, a thought reinforced
by Carl Hagberg at the panel's conclusion.
 Beginning
with pre-conference programs on Wednesday, June 27, through the traditional sing-along
after the Saturday night gala on June 30, the 2001 National Conference at The
Broadmoor, in Colorado Springs, Colorado, will provide members with highly-relevant
panels, focused breakouts, provocative speakers, and varied networking opportunities.
Under the very able direction of this year's National Conference Chairman Suzanne
Suter, and her team, the business and social programs are taking shape.
A few favorite aspects of recent conferences will be part of the 2001 meeting
in Colorado. One of the pre-conference programs will again be on ethics. David
Martin, Director of the Division of Corporation Finance, will return to respond
to members' questions about the SEC. Former Texas Governor Ann Richards
will continue our tradition of engaging Annual Luncheon speakers; Coors Brewing
Company Chairman, Peters Coors, will get us off to a rousing start as the Opening
Speaker of the conference; and William Gray, President and CEO, the United Negro
College Fund, will cap the conference with a Closing Address.
At the end of the business sessions, there will be ample opportunity to socialize
and network with fellow members, with the traditional "kick-off" Opening
Reception on Wednesday evening followed by a "Singles Dinner" and
"First-Timers" Dinner. There will also be a Family Night event on
Thursday, and a "Black & White" Closing Gala with entertainment
on Saturday night. Once again, to encourage families to visit and enjoy The
Broadmoor together, free childcare will be provided throughout the conference.
More detailed information about the 2001 National Conference will begin coming
to you soon, so be on the lookout for it. For now, mark your calendars for The
Broadmoor from June 27-July 1, 2001.
By Steve Sears, Director, U.S. Research
What is ISS?
Founded in 1985, Institutional Shareholder Services (ISS) is now part of Thomson
Financial, a $1 billion provider of information services and work solutions
to the worldwide financial community. The ISS mission is straightforward: to
make recommendations that enhance long-term share value for our clients.
How do I communicate with ISS?
As your corporation prepares for its next annual meeting, you may want to add
regular communications with ISS to your "to-do" list. In 2001, ISS
expects to analyze ballot items for nearly 9,000 U.S. meetings and provide our
500-plus institutional investor clients with vote recommendations. Contrary
to popular belief, ISS's proxy voting guidelines call for "case-by-case"
analysis of most issues. As a result, ISS analysts often solicit (and always
welcome) input from corporations that expands upon the information provided
in the proxy statement and the other annual disclosure documents. Given ISS's
heavy workload, especially at the season's March-to-May peak, it is best
to open the lines of communications early and to give our analysts the heads-up
concerning any new or unusual issues that may appear on your company's
ballot. Following is a suggested timetable for how your company can work most
effectively with ISS:
Drafting Stage - The fate of most proxy proposals is decided at
the drafting table. The devil is truly in the details as small slips of the
pen (or the keyboard) can cost you voting support. To avoid such problems, you
should make sure that you understand shareholders' hot-button concerns
on each issue that is likely to show up on your ballot. Some large activist
investors' voting policies are public; many others will provide them to
issuers upon request.
In recent years, ISS's Corporate Programs Division has sought to make our policies
readily available to the issuer community. Prior to the start of each season,
ISS broadcasts changes in our policies via press releases and our Web site.
(For notes on some of these changes, see the "Issues Update" article
that begins on page 3 of this newsletter.) The ISS
Proxy Voting Manual, a detailed compilation of ISS's voting policies and our
framework for making vote decisions on every issue brought to shareholders for
approval, is available to corporations as part of our Proxy ISSues Service.
If you need additional assistance or have specific questions about the application
of ISS voting policies or trends in proposal design, you can contact Jill Lyons,
ISS's Director, Research & Development at 301-545-4172 (e-mail: jill.lyons@tfn.com).
Once ISS has received all of the pertinent documents, the meeting will be assigned
to an analyst. The complexity of the subject matter rather than the company's
industry will determine the assignment, so you cannot assume that the same analyst
who prepared the previous season's report will do so again.
In addition, if you want to receive a copy of ISS's final Proxy Analysis,
send a letter to Fawn Coleman, ISS's Manager of Client Services (same street
address as above) or send an e-mail request to ISSCS@tfn.com),
at least three-to-four weeks in advance of the meeting date.
ISS Draft Analysis - As a general policy, ISS requests face-to-face
meetings with all parties involved in a proxy contest or a contested merger.
The presence of complex and controversial issues also may lead ISS to seek a
meeting with the company. Discussions on most other issues are typically handled
via conference calls.
In addition, approximately 19 calendar days prior to the shareholders'
meeting, companies in the S&P 500 index with non-routine proposals (issues
other than uncontested director elections and auditor ratification) can expect
to receive a draft proxy analysis from ISS. Typically, ISS allows a two-day
review of these draft documents. (Requests for a longer comment-and-review period
are granted on a time-permitting basis.)
Many other companies seek the opportunity to review draft ISS analyses. ISS
makes every effort to accommodate these requests and considers them on a case-by-case
basis. For consideration of a request for a review or extension, contact Steve
Sears, Director, U.S. Research, at 301-545-4205 (e-mail is stephen.sears@tfn.com)
Issuers in non-U.S. markets should contact Stanley Dubiel, Director, Global
Research, at 301-545-4130 (e-mail is stanley.dubiel@tfn.com).
ISS Delivery Date - ISS's draft proxy analyses are reviewed
for content by staff members and for style by our editorial staff. Reports are
then delivered to clients electronically. ISS makes every effort to deliver
a final analysis to its clients 17 calendar days before the annual meeting so
that institutions have time to review the report, conduct additional research,
or follow-up with questions prior to making a voting decision.
If additional information comes to light following the release of our final
report, you can contact the analyst who prepared the report. If the new information
is seen as significant, ISS will issue an "Alert" to our clients.
Anytime - ISS invites corporate input on its voting policies. Past
discussion with issuers have been instrumental in our efforts to refine and
improve our approach to complex voting issues.
Finally, ISS also wants your suggestions on how we can do a better job of addressing
your needs. If you want to share your thoughts, call Patrick McGurn, ISS's
Director of Corporate Programs at 301-545-4177 (e-mail is patrick.mcgurn@tfn.com).
The Investor Responsibility Research Center (IRRC) provides institutional shareholders
with research on the issues important to the diligent investor. It does not
issue voting recommendations.
IRRC research provides data on upcoming management and shareholder initiatives
for thousands of U.S. and non-U.S. companies, and background information on
a wide range of governance, social and environmental issues. IRRC software allows
investor clients to design voting guidelines and handle vote record-keeping
and voting. For investors who want to outsource the whole proxy process, IRRC
can manage the entire proxy voting process - from developing guidelines
that reflect the client's point of view, to casting the votes and issuing
the necessary documentation.
IRRC's research is also available to corporate secretaries and other corporate
departments to alert them to trends and developments in corporate governance
and shareholder action. IRRC's Proxy Information Service, now offered on
Online Analyst, IRRC's client-only, interactive Web site, provides:
- a listing of the social policy and corporate governance shareholder proposals
filed each season at U.S. companies
- an at-a-glance checklist - updated daily and searchable by sponsor,
company, meeting date, or topic - of the status of these proposals
- background reports on all the major issues - from executive pay to
environmental reporting - that will be raised in management and shareholder
proposals
- profiles of key shareholder proponents, giving their contact information,
focus issues and recent history in filing proposals
- weekly news flashes - of the latest corporate governance trends and
shareholder campaigns - and company responses
- more coverage - in monthly and quarterly newsletters - of shareholder
activities, corporate responses and related regulatory and legal developments
- voting results for management and shareholder proposals
A second package specifically tailored to the corporate community is IRRC's
Stock Option Plan Review, which enables stock option plan professionals
to compare proposed stock-based incentive plans with those of selected peer
groups in order to gauge the plan's position relative to the market -
and to determine likely shareholder acceptance for it.
More information about IRRC and its services is available on its Web site,
at www.irrc.org, or from its
sales department at 202-833-0700 or mkt@irrc.org.
Meg Voorhes
(Meg Voorhes is the director of IRRC's Social Issues Service)
Last year was a record season for shareholder proposals at the SEC - the
number received was up 36% over the previous year. Here, in the SEC's own
words, are some suggestions that will help the process this year.
Procedural
- Send ASAP
- During highest volume months (Jan. - Mar.) turnaround time might exceed
45 days
- Limit calls to staff until two to three weeks preprint date
- Submit multiple letters singly or in small groups rather than waiting and
sending them all at once
- Include all relevant correspondence with proponent, including initial letter
submitting the proposal
- Let us know if proponent intends to withdraw letter - we will expedite if
proponent changes mind
Substantive
- Provide well-researched, thorough argument; avoid conclusory statements
- Avoid long string cites to marginally relevant letters
- Provide parenthetical explanation when citing precedent
- We research every ground cited, so it is helpful to avoid baseless grounds
- Discuss contrary precedent and distinguish it, otherwise when we find it,
your argument will not be there
by Lisa Hendrikson-Loesch, Director, Marketing, ICS
In today's increasingly competitive environment, companies both big and
small are challenged to "do more with less" to improve the cost-efficiency
and productivity of all aspects of their operations. The world of investor communications
is certainly no exception. Investor Communication Services (ICS), A Division
of ADP, stands ready to help corporations meet this challenge. To this end,
we would like to offer some helpful hints and reminders in planning for the
2001 Proxy Season.
Helpful Hints for the 2001 Proxy Season
After your search date notification, ICS will either provide or will
need the following:
- By the sixth day, ICS will send a "Material Request" report to
you or your agent. Remember: You should not send material to ICS based upon
this number. This is only an estimate - we will provide a final number
at a later date.
- Proxy card language should be sent to ICS as soon as possible - prior
to the receipt of proxy material for mailing. This allows ICS to pre-print
your Vote Instruction Form (VIF) so we can begin your mailing as soon as your
materials arrive. We strongly suggest that your information be sent electronically
or in hard copy in order to avoid any misinterpretation.
- An exact material request will be provided three days after the record
date of your annual meeting. We recommend that you send some surplus to allow
for set-up and spoilage. If you would like any surplus returned to you, please
provide specific instructions.
- If you are offering the option of electronic delivery and voting over the
Internet, all documents must be "live" on the web when shipping
begins.
- Voting information will be available through our voice response system
"24X7."
More and more issuers have taken advantage of the dramatic savings that are
available by using alternative mailing methods. Some of these are:
- Standard A offers the greatest savings in postage rates with only a few
days longer delivery time than First Class Mail. Many issuers have switched
from First Class mail to Standard A mail and have realized savings on average
of $1.60 per piece mailed.
- Stratified Mail is a great option for those issuers who are looking to
reduce their postage expense but are not ready to commit to a full bulk mailing.
A "Stratified" mailing consists of a combination of First Class
mail rates and Standard A mail rates. ICS has the capability to mail your
proxy material based on a share range analysis of your record date files.
As a general rule, 80% of the shares in beneficial ownership are held by 20%
of the holders. Mailing to 20% of your beneficial holders by First Class mail
and 80% by Standard A mail allows you to achieve substantial postage savings
while maintaining the benefits of First Class mailings to your largest shareowners.
- SmartMail Services is one of the most innovative approaches used frequently
by ICS to achieve postage savings. This alternative to First Class mailing
provides the same delivery commitment as the United States Postal Service's
First Class product. SmartMail's innovative use of EXPRESS MAIL enables
you to achieve the same time to market as First Class mail at a considerable
cost savings. You can learn more about SmartMail by visiting www.smartmail.com.
Electronic Delivery can make a significant impact on cost savings. This
is how it works:
- ICS collects consents and e-mail addresses from beneficial and registered
shareowners and maintains them in one large database referred to as the ICS
"preference" database. Shareowners are able to provide their consent
or preference for electronic delivery any time they vote on www.proxyvote.com
or through customized sites (icsdelivery.com).
- ICS then matches the preference database to each issuer's shareowner
file. When the issuer is ready to initiate a communication, ICS confirms that
the material is available on the Internet at the same time hard copy mailings
are being made.
- If the information is not available on the Internet, hard copy is sent.
- For electronic delivery, ICS must be notified of your intent to use the
Internet on or before the record date. We will need the URL for the material
5 business days before delivery and the URL must be 'live' on the
day the hard copies are being mailed.
- For electronic delivery to be effective, the issuer must
- determine how to get the proxy materials translated to the Internet
on time,
- determine where the materials will be hosted (URL),
- notify ICS of their intentions and a test URL, and
- verify Internet materials are live on the appropriate date. If internal
resources are not available to provide the support necessary, ICS will
be happy to provide the necessary resources to convert and post your documents.
During 2001 Proxy Season, as part of our commitment to electronic delivery,
these services will be provided at no charge to the Issuer.
For more information on how we serve the shareowner services community, visit
our Web site at www.icsdelivers.com or call 800-669-4213.
To send information regarding your upcoming proxy, contact Peter Descovich
@ 800-942-3037 or by e-mail, pdescovich@bis.adp.com.
The combined membership recruiting efforts of the National Membership Committee,
the National Office, and individual members have produced record-breaking results.
As of December 31, 2000, total membership is at an all-time high. The current
totals stand at 4,171 members from 2,902 companies (compared to 4,022 from 2,797
companies on December 31, 1999).
I want to remind members that you still have an opportunity to win one of the
four vacation prizes being offered to those sponsoring new members who join
during this year's campaign, which ends on March 31. The top recruiter
will win a Caribbean vacation package. The member recruiting the second highest
number will enjoy a stay at the Reno Hilton in Nevada. In addition, every member
who recruits at least one new member will be entered into one prize drawing
for a Walt Disney World Resort vacation, and every member who recruits more
than one new member will be entered into a second drawing as well to win a special
weekend at the Century Plaza in Los Angeles.
Earning prizes is a great incentive individually, but it is not the only reason
we hope members will take an active role in this year's campaign. If ASCS
has played a role in the success of your career, you can give something back
through a personal commitment to reach out and bring in new members. You can
pass along copies of the membership brochure to your colleagues who are not
yet ASCS members or refer them to our Web site (http://www.ascs.org)
to learn more about member benefits. Whether they join online or by paper application,
remind them to write your name in the "Member Recommending ASCS" box,
to ensure that you get proper credit for your recruiting efforts.
Additional copies of the brochure are available from Deborah Fox in the National
Office (212-681-2014 or via e-mail to dfox@governanceprofessionals.org).
Kathleen M. Haley
Membership Committee Chairman
On November 3, 2000, the Society's Milwaukee Chapter and financial printer
Bowne of Milwaukee cosponsored their ninth annual half-day corporate/securities
seminar for approximately 120 registrants, principally from Wisconsin and Illinois.
Society President David Smith spoke to an attentive audience at the luncheon
concluding the seminar. His topic was "The Case for a Chief Governance
Officer," and he discussed why the corporate secretary is the logical officer
to designate as the officer who will have formal responsibility for corporate
governance matters. Jack Goetsch, Chairman of the Society from 1993-1994, when
he was Vice President and Secretary of Wisconsin Energy Corporation, introduced
David.
The seminar consisted of two one and one-half hour panel discussions. After
a continental breakfast, courtesy of Bowne of Milwaukee, Mark Green, an Assistant
Director of the SEC's Division of Corporation Finance and Chief of the
Office of New Products and Structured Finance; Paul Jones, an attorney with
Foley & Lardner's Milwaukee office; and Rob Adler, cofounder and President
of CCBN.com, discussed "the Pervasive Impact of the Internet." Topics
covered included electronic delivery of information, Web site practices and
the issuer's liability for Web site content, special considerations during
1933 Act offerings, "chat room" issues, and preserving the safe harbor
for forward-looking statements.
The second panel, composed of Mark Green, Larry Lieberman, a partner in the
law firm of Godfrey & Kahn, S.C., and Richard Brown, a partner in the Milwaukee
office of KPMG LLP, discussed the ramifications of Regulation FD; considerations
in complying with the SEC's audit committee requirements; the new SEC rules
permitting householding of proxy material; and other SEC action and initiatives,
including the SEC's Auditor Independence rule and lessons from the first
year of experience with SAB 99's materiality standards.
The members of the Planning Committee for the seminar were Bruce C. Davidson,
Quarles & Brady LLP; Kate M. Fleming, Northwestern Mutual Life Insurance
Company; Hans R. Kirkegaard, Bowne of Milwaukee; and Teresa M. Levy, Michael
Best & Friedrich LLP. As in previous years, the seminar qualified for 3.5
CLEs in Wisconsin.
The Society's Information Resource Center has done a random sampling
of 1999 company proxy statements for those that contain descriptions of their
policies on mandatory retirement age or term limits for non-employee directors.
Of several hundred proxies studied, we found 50 policy descriptions, which reveal
the following data:
- The maximum age for board service by non-employee directors ranges from
65 to 73;
- The most often cited mandatory retirement age for non-employee directors
is 70 (24 of 50 companies studied), with 72 ranking second (19 companies);
- Only three of the companies studied publicized a term limit policy. Two
companies limited service to four three-year terms or 12 years; and one company
limited service to 15 years;
- One company had an unusual provision that called for directors elected before
the age of 60 to retire at age 70, and directors elected after the age of
60 to retire by age 72;
- Another company has adopted a by-law provision that permits the board to
reelect a director to additional one-year terms by a two-thirds vote of the
board in circumstances deemed to be "of significant benefit to the company."
A company-by-company summary of the mandatory retirement survey results is
available on the Society's Web site, www.ascs.org
in the "Information Resource Center/Core Documents" section or by
contacting the Research and Information Department at (212) 681-2010. Studies
such as this one are dependent on the Society's National Office having
on hand as many company proxy statements and annual reports as possible. Members
are asked to make sure their companies' investor relations departments
put the National Office on their mailing lists.
 Donald
E. Pease, past Chairman of ASCS (1981-1982) and current honorary member,
has published a book titled A Common Soldier in the Civil War, a meticulously
researched and interesting read about his great-grandfather, Irvin W. Sullivan,
who served for two and a half years as a teamster in the supply trains of the
First and Fifth Army Corps. The supply trains of the Union Army were part of
the Quartermaster Corps, and were "a branch that historians have neglected,"
according to Thomas J. Reed, Historian and Professor of Law at Widener University
School of Law. Mr. Reed also said in praise of Mr. Pease's book, "Sit back
and enjoy a good read. This is an excellent book that will help you understand
how the service support units made Union victory possible."
Through his extensive research, Mr. Pease was able to reconstruct much of his
great-grandfather's experience, using in his writing the tools of fictional
diary and letters home to paint a very real picture of the daily realities of
war. The book is available directly from the author by sending a check for $20.00
to Mr. Donald E. Pease, Stonegates, #117, 4031 Kennett Pike, Greenville, DE
The Georgetown University Law Center Continuing Legal Education's Corporate
Counsel Institute cosponsored by the American Corporate Counsel Association
and the American Society of Corporate Secretaries will be held in Washington,
DC, at the Georgetown University Law Center Moot Courtroom, March 15-16, 2001.
The Institute is designed specifically for in-house counsel by in-house counsel.
You can expect to delve into the hottest issues facing in-house counsel: antitrust;
Regulation FD; employment law, including mandatory arbitration agreements and
corporate raiding; IP and patent strategies; and how to work effectively with
the CEO and board of directors. Program highlights include: general counsel
roundtable; special emphasis on e-commerce; ethics roundtable; and briefings
by top government officials on their priorities and strategic directions.
Rice University Executive Education in the Jones Graduate School of Management
and the Corporate TeleLink Network (CTN) have come together to produce
a videotape of a recent satellite broadcast entitled "Corporate Governance:
The Basics and Beyond." The four-hour videotape covers a variety of
topics, including how boards function in times of calm and during crises such
as corporate takeover bids, reformulations of corporate strategy, and financial
distress. Viewing it will equip participants with an understanding of the legal,
managerial, economic, and behavioral decision-making processes associated with
governance.
Speakers on the tape include: James A. Baker III, former Secretary of
State; Linda Auwers, Vice President, Secretary and Associate General
Counsel, Compaq Computer Corp.; and Gilbert Whitaker, Dean, Jesse H.
Jones Graduate School of Management, Rice University.
It is available for $1,995. To order, call 972-620-4015.
Commentary
Eight online trends that could rock your world...
or Make it a Better Place, By Broc Romanek
Broc Romanek (broc.romanek@rrd.com)
is Director of Strategic Development-Internet for RR Donnelley Financial,
and Founder and CEO of realcorporatelawyer.com. The views expressed in this
article are the author's alone and do not necessarily represent the views
of RR Donnelley Financial.
As we turn into the new millennium, its truly amazing how much has changed
during the past decade. Even more astonishing are the changes that are just
around the corner - or that are predicted to be upon us in a few years.
So much is happening that no one can honestly claim that they have a complete
grasp of every new development. To some extent, chaos has become the norm.
Below is a brief description of eight trends that threaten to complicate the
roles of corporate secretaries and in-house lawyers - or make their jobs
easier. As with any new technology, whether these developments will have lasting
effects remains to be seen.
- Investor Communications with Other Investors
It is well known that message boards and chat rooms are wildly popular with
many individual investors. There are dozens of Web sites that sponsor message
boards devoted to discussions about individual companies. The most popular
of these message board sponsors - Yahoo! Finance, Raging Bull, Silicon
Investor, Motley Fool and AOL - host thousands of boards. The most active
boards have thousands of messages posted about a particular company and its
financial performance. Although these online communities have been occasional
sources of leaks and embarrassment for many companies, they are mainly harmless
and represent a sea change regarding how investors can find each other.
- Investor Communications with Management
Institutional investors increasingly are leveraging the Web's communications
power to get their message out - by announcing how they intend to vote, publicizing
their policies or even posting correspondence with management to emphasize
a point. For example, CalPERS has had a Shareowner Forum Web page for several
years (www.calpers-governance.org/forumhome.asp) to publicize how it intends
to vote, list its shareholder proposals and corporate governance principles,
and identify the companies on its "Focus" list. The Council of Institutional
Investors uses its Web site (www.cii.org)
for similar purposes.
Recently, a new breed of Web sites has been created that are even more proactive
and resourceful. For example, eRaider (www.eraider.com) targets perceived
underperforming mid-and small-cap companies. An unaffiliated fund acquires
a 4.9% stake in the targeted companies and then posts articles related to
the target's business and financials. The "State of the eRaid"
includes an action plan related to each target company and enables frustrated
stockholders to find each other on message boards.
The Corporate Library (www.thecorporatelibrary.com)
has a wealth of resources relating to corporate governance. The site is a
central repository of shareholder proposals for the latest proxy season, with
proposals available in full text and sortable by issuer, date, proponent and
type of proposal. It also has a growing database of CEO employment contracts
for the Fortune 500 companies, and a Director Screening Tool that allows an
investor to research a director's age, stock holdings, attendance record,
and number of directorships - all of which may be relevant to decide
how to cast a vote come reelection time.
- Types and Methods of Raising Capital
The Web has enabled investment bankers to experiment with the offering process
(e.g. conditional offers to buy rather than indications of interest) -
as well as the nature of offerings themselves. This is best exemplified by
the emergence of online Dutch auctions, which makes the pricing of offerings
more of a science and less of an art (now offered by WR Hambrecht, Bear Stearns
and Wit Capital).
Subject to applicable law, issuers can more easily find interested investors
through the Internet for their public, private and offshore offerings. For
example, the number of issuers adopting direct stock purchase plans has skyrocketed,
principally because investors can now determine who has these plans through
online directories like NetStockDirect (www.netstockdirect.com).
In fact, brokers have now created synthetic DRSPPs for issuers that have not
adopted a plan, like Sharebuilder (www.sharebuilder.com)
and Buy and Hold (www.buyandhold.com).
- Electronic Delivery and Voting
Although electronic voting clearly appears to have taken off (and online voting
is quickly catching up to telephonic voting), electronic delivery has not
had such spectacular results...so far. Many commentators believe that once
a critical mass of investors have broadband connections, the SEC may loosen
its rules to make it easier for market participants to meet delivery obligation
through electronic means. This combined with better technology may enable
electronic delivery to fulfill its promise of cheaper and quicker communication.
- Delivery of Legal Advice
New ways to provide legal advice are slowly advancing, like the artificially intelligent
decision tree of Linklater's "Blue Flag." Perhaps long overdue, the
pricing of legal services is about to become more transparent, courtesy of attorney
auction sites such as www.eLawforum.com
and www.ibidlaw.com. Sites with greater complimentary resources are growing, including
the soon-to-be launched RR Donnelley Financial's www.realcorporatelawyer.com.
- Multimedia and Wireless Communications
Fueled by Regulation FD, Webcasts have become widely accepted as a method
for companies to conduct analyst conference calls. Although most Webcasts
are audio, some have slide show complements or are combined with video. The
road is being paved for online stockholders' meetings by state legislatures
(Delaware being the first) and broader bandwidth likely will lead to greater
use of multimedia by issuers for their traditionally textual SEC filings.
Wireless communications are in their infancy but promise to make life easier
by allowing "anytime, anywhere" access to information. Standards,
such as those offered by AvantGo, are just beginning to be adopted by Web
site operators and should enable users to download volumes of information
to handheld devices for later use.
- Financial Analytical Tools and Disclosure
Sophisticated modeling tools are now available online to facilitate the ability
of individual investors to challenge the assumptions of analysts. XBRL (eXtensible
Business Mark-up Language) is a new financial reporting language built for
the Web and is widely expected to become the standard method by which public
companies prepare, report and disseminate their financial information. Not
only can each user choose their own presentation format and style of XBRL
financials, users will be able to easily manipulate data within an industry
or selected companies. This should revolutionize how financial analysis is
conducted and make it more widely available.
- Director Communications
The first companies are building extranets for their boards to communicate
with management and each other. These can be custom built or taken off the
shelf from vendors, like BoardVantage and Firm Logic. Extranets enable directors
to have more resources available at their fingertips. It also enables them
to better manage the increasing volumes of information in board packages.
The Society's Web site, ascs.org, has been totally redesigned
by Russell Benasaraf, Computer Systems Administrator. After working with the
same design and navigational tools for some time, Russell, encouraged by a task
force ("SWAT team") of board members, decided that a fresh look and
a more user-friendly format could improve the site. Some of these changes are:
a cleaner interface on an easy-to-read white background, clearly delineated
sections of members-only access, and a "What's New" Section that
is right up front and updated as frequently as new information becomes available.
Another important new development is that there is no longer a charge to members
for accessing online Core Documents. Having sample corporate documents readily
available is just one more example of how the Society is working to give greater
value for your membership.
Recent increased usage of ascs.org by members and by the National Office staff
alike seems to confirm that the changes have been well received. Society President
David Smith has said that if members have not visited the Society's Web site
recently, it is important to do so. Smith reminds members, "We are increasingly
using the ASCS Web site and e-mail to bring timely and important information
to our members, but with only 3,100 e-mail addresses of our 4,171 members, too
many are missing out. I urge each member to ensure that the National Office
has his or her e-mail address and that they have a password to access the 'members-only'
section of the site." For those members who do not know their password
(every member has been assigned one) contact Russell at rbenasaraf@governanceprofessionals.org.
We look forward to your next visit to ascs.org.
The Corporate Secretary is published throughout the year as a service to members of the Society of Corporate Secretaries and Governance Professionals. Articles or statements appearing herein do not constitute legal opinion, advice or judgment and should not be relied upon as such. Inquiries regarding information contained in this newsletter should be directed to Geoff Loftus, at (212) 681-2000 or by e-mail: gloftus@governanceprofessionals.org. Inquiries regarding membership or publication orders should be addressed to:
Membership Publications
Deborah Fox Olga Holmes
(212) 681-2014 (212) 681-2015
Society of Corporate Secretaries and Governance Professionals
521 Fifth Avenue New York NY 10175
212-681-2000 - Fax 212-681-2005
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